UN Seeks Insurers' Help to Combat Sanctions-Busting

The United Nations Security Council is reaching out to marine insurers and oil traders to help combat North Korea's sanctions-busting efforts.

The United Nations and the United States have implemented far-reaching restrictions on trade with North Korea, including near-complete bans on oil imports and coal exports. To circumvent these sanctions, the North has taken to high-seas ship-to-ship transfers between foreign-flag product tankers and its own vessels, thereby eliminating the need for the foreign ships to call at its closely-monitored ports. In addition, it has arranged to transship its coal export cargoes at ports in the Russian Far East in order to disguise their origin.

The U.S., Japan, South Korea and allied nations have documented these sanctions violations extensively using surveillance imagery. The evidence has been used to penalize specific shipowners and vessels, seize assets and pursue prosecutions, but the UNSC says that the practice continues.

To cut down on these illicit movements, the UNSC would like to enlist the help of a small group of insurers and traders, according to North Korea coordinator Hugh Griffiths. In a recent interview, Griffiths told CNBC that simple contract clauses requiring end-use verification for sanctioned cargoes and the continuous transmission of AIS would go a long way towards combating trafficking.

"The vessels switch off their AIS just before they meet at sea, meaning that they cannot be tracked any longer," Griffiths said. "If a vessel switches off its AIS at sea, there is a heightened risk that it's doing something clandestine or illegal."

Griffiths indicated that there are only 10 traders and 10 insurers/reinsurers with ties to known suspect ships. Notably, every one of these ships has reinsurance with Western firms, he said - meaning that reinsurance contract clauses could have a significant impact on the trade.